Being paid in England, FAQ
1. Introduction
Packing and moving your life to the other hemisphere will be an exciting experience, but it also comes with several anxieties.
This blog is aimed at providing pay and finance information so that it will be easier for you to make decisions on related matters upon arrival in the country.
We aim to target teachers moving from Australia, however most other nations that have similar tax systems should also be easily translated.
Ultimately, whilst working in England, you want to best understand how pay and tax work to make the most informed decisions about where you work.
2. When is the financial year in England?
The Financial year runs from April 6th through to April 5th every year. This is important as your tax-free income resets every year - meaning you may have just started having an extra deduction from pay as you earn (PAYE) tax. You may have recently noticed a change in your take-home pay in the last month (April) because of this. The reason for this will be explained below.
3. Am I required to do a tax return?
No. Unlike Australia, you do not go to an accountant or are required to complete a tax return. Her Majesty's Revenue and Customs (HMRC) which is the equivalent of the Australian Tax Office (ATO) do it automatically for you each pay cycle through your employers Payroll. You are automatically taxed the correct amount each pay period according to HMRC’s records.
If you happened to pay too little or too much tax over the course of a financial year, you will receive a P800 letter in the mail. This is usually in the form of your tax code increasing or decreasing for the following tax year. For you to receive this letter you need to make sure your address is up to date with HMRC. If you change your address, please always make sure you tell HMRC and your agency, so you receive any relevant correspondence about changes.
https://www.gov.uk/tell-hmrc-change-address
https://www.gov.uk/tax-overpayments-and-underpayments#:~:text=If%20you've%20paid%20too,a%20Simple%20Assessment%20letter
4. Should I opt in or opt out of Pension?
Mandatory pension in the UK only started in 2012 and it is currently 8%. If you are contributing to a pension, 5% of your Salary shall be deducted from your weekly or monthly earnings. Your employer will contribute the remaining 3%.
You will either be enrolled immediately or after 3 months from the start of your employment. Every employee is required to be automatically enrolled in pension, even if you don’t want to. Once you are enrolled you can then opt out at any point. If you opt out within the first month, you will receive a full refund of what you have contributed, therefore it is in your best interest to do this immediately unless you plan to live in the United Kingdom until you are 55.
In order to transfer your pension to Australia you need to have a minimum of £20,000 in the pension account and expect hefty fees in the process (1).
I am not a financial advisor so cannot give advice about what to do as every person has their own unique situation. I now have a family and plan to retire in the UK, therefore I do have a pension fund set up. If I didn’t plan to retire in the UK, I would opt out as soon as I had been automatically enrolled.
https://www.gov.uk/workplace-pensions/if-you-want-to-leave-your-workplace-pension-scheme
5. What is PAYE?
Pay as you earn (PAYE) is HMRC’s system to collect income tax which contributes to pay for things like Education and Healthcare. It’s similar to pay as you go (PAYG) in Australia and calculates in a similar way. In the UK there are additional National Insurance deductions on top of PAYE. National Insurance comes in two forms; Employee and Employer, we will get to that shortly.
6. What does my tax code mean?
Most people will be given the standard tax code 1257L, you can see this code on every pay slip. This Tax code means you can earn £12,570 over the course of the financial year before paying PAYE Tax.
Your tax code can fluctuate, especially If you have multiple jobs with different employers. In this instance HRMC will split your tax code across each depending on how much they pay you in a period. If you cease employment with a company, email them in writing requesting to finish up. This may have a positive effect on your tax code. If you believe your tax code isn’t accurate, it will be best to contact both your employer and HMRC directly, who should be able to provide accurate answers.
7. How much PAYE will I pay?
If you are working from April 6th the £12,570 you can earn PAYE free is pro-rata. Each week you can earn £242 (£1,047.50 each month) before paying any PAYE tax. Any earnings above this amount you will notice you are paying PAYE Tax.
If you arrive and start work on September 6th you will have 5 months (April to August = £5,237.50) that you have stored before paying any PAYE. As a teacher, you will only start paying PAYE in around December or January when you have caught this figure up. If you arrive at Christmas, you will have 9+ months of this amount banked, so it is unlikely that you are going to pay any PAYE until the following financial year from April 6th.
The below example payslip shows how PAYE is affected with the change of the new financial year.
For earnings from £12,570 through to £50,271, you will be paying PAYE tax of 20%.
8. How much Employee National Insurance will I pay?
All employees pay this every week/month. It is separate to PAYE; you will have this amount deducted from each pay.
Healthcare is free in the UK which is great. This is only possible because of the National Insurance contributions.
https://www.gov.uk/national-insurance-rates-letters
9. Am I required to pay Employers National Insurance?
If you are paid directly through a company on PAYE this deduction does not come off your Gross pay. Your Employer will take liability of this amount, and this is why quoted rates on PAYE are lower than those of Umbrella.
If you are paid through an Umbrella company, you take the liable to pay this deduction, so you need to consider this if you decide to sign up with an Umbrella company. More information on this can be found on our PAYE v Umbrella Blog.
Employers NI for most people is calculated at 13.25% for everything earned above £190 a week or £823 a month (2).
10. Example Payslip
For context this is a TeacherWho arrived and started working in January 2024.
PAYE Tax: During the 2023-24 financial year this person earned £11,540.02, less than the annual £12,570, therefore paid £0 PAYE Tax for this financial year.
5 weeks later, with the new fiscal year, was now paying £175.40 in PAYE Tax
Employee National Insurance: All employees pay this every week/month. It is separate to PAYE; you will have this amount deducted each pay from every payslip.
Healthcare is free in the UK which is great. This is only possible because of the National Insurance contributions.
https://www.gov.uk/national-insurance-rates-letters
Employers National Insurance: For most people it is calculated at 13.25% for everything earned above £190 a week or £823 a month (2).
If you are paid directly through the agency on PAYE, your employer is liable for this amount. It should be seperated from your daily rate, not deducted. As you can see above, there is no Employers NI deduction.
If you are paid through an Umbrella company, you are liable to pay this deduction. Typically, agencies will lure you in with an inflated daily rate, which is inflated because they don’t have to pay this cost anymore, they have passed it onto you. You will be left thinking you are being paid more, when the truth is you are paid more given the fact that this extra amount (and potentially even more) will be deducted to give you a reduced take-home figure.
Opting out of Pension: On this particular week this person had opted out of their pension, and therefore received a refund of what they had paid. It is important to do this within the first month of being enrolled.
11. PAYE Calculator
Here is a calculator you can use to give you an idea around take-home pay amounts. Because education has 13 weeks of holidays out of 52 of a calendar year, the weekly numbers will be skewed if you are paid on a daily rate a week in arrears, but the annual and monthly amounts will be accurate as a guide.
12. Summary
Pay is highly confusing at the best of times, but the earlier the considerations and decisions to be made around these things, the better off you will be to enjoy London as well as Europe, being the incredible place it is.